Spirit AeroSystems announces new cost-reduction measures in light of coronavirus
Boeing 787. Source | Boeing
Spirit AeroSystems (Wichita, Kan., U.S.) announced on April 8 a series of additional actions the company is taking to reduce costs and preserve liquidity in light of the economic impacts of the COVID-19 pandemic and continued uncertainty in the industry.
“Spirit has enacted a robust crisis management and response process as part of our enterprise risk management program to help us navigate the challenges we face due to the COVID-19 pandemic,” Says Tom Gentile, president and CEO of Spirit AeroSystems. “We are proactively taking steps to ensure the safety of our team as we maintain operations to support our customers, including the critical work we do on national security programs.”
On April 6, Spirit AeroSystems received notice from Boeing (Chicago, Ill., U.S.) that all deliveries to Boeing’s Washington state and South Carolina facilities are suspended until further notice due to Boeing's indefinite production suspension at the sites. As a result, Spirit has halted production for Boeing programs, subject to certain exceptions, performed at its facilities in Wichita, Kansas, and in Tulsa and McAlester, Oklahoma for an indefinite period of time. Spirit Defense work as well as Airbus and other non-Boeing work will continue at such facilities.
In light of the 737 MAX production suspension that began on January 1, 2020, Spirit initiated the following actions to reduce costs:
- Implemented workforce reductions of 2,800 employees in Wichita, Kansas and 400 employees in Oklahoma
- Initiated a voluntary retirement program for 850 hourly and salaried workers
- Deferred more than $120 million of capital expenditures
- Extended union contracts for employees represented by the IAM and IBEW for three years
- Negotiated an amendment to its credit facility providing for covenant relief into 2021 and secured a $375 million short-term delayed draw term loan facility
- Reduced its cash dividend to a penny per share
- Continued the suspension of its share repurchase program
- Negotiated a new production agreement with Boeing; extended the MAX contract three years to 2033; received $225 million advance from Boeing; deferred repayment of $123 million advance from Boeing to 2022.
To further reduce costs due to the economic impact of the COVID-19 pandemic and related production suspension, Spirit has taken the following additional actions:
- Reduced pay for all U.S.-based executives by 20% until further notice. The company will address non-U.S. executive pay in accordance with local law and statutory requirements
- Initiated a 21 calendar-day furlough of production workers and managers supporting Boeing programs in Wichita, Kansas and Oklahoma
- Implemented a four-day work week for its salaried workforce at its Wichita, Kansas facility until further notice.
If OEM production rates decline in the future, Spirit will evaluate further cost reduction actions, including additional workforce actions.
In addition, Spirit reports that it has acted proactively to support the health and safety of employees by assembling its global crisis management team that has focused on creating and implementing processes to mitigate the exposure to and spread of COVID-19 in the workplace, following CDC and other government and health agency guidelines.
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